Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/234760
Authors: 
Barattieri, Alessandro
Moretti, Laura
Quadrini, Vincenzo
Year of Publication: 
2018
Series/Report no.: 
Document de travail No. 2018-05
Publisher: 
Université du Québec à Montréal, École des sciences de la gestion (ESG UQAM), Département des sciences économiques, Montréal
Abstract: 
We show that higher interconnectivity among financial intermediaries induces banks to choose more leverage. Although this leads to higher investment growth, the banking sector becomes more vulnerable to aggregate shocks (crises). We also show that learning about the likelihood of a crisis could have played an important role in generating the high interconnectivity and leverage before the 2008 crisis and the drastic reversal after the crisis. Using balance sheet data for over 14,000 financial intermediaries in 30 OECD countries we find that there is a strong positive correlation between our proxy for interconnectivity and leverage, consistent with the model.
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.